Figure 2.1. Production Possibilities Frontier
-Referring to Figure 2.1, the relative cost of steel in terms of aluminum is
A) 4.0 tons.
B) 2.0 tons.
C) 0.5 tons.
D) 0.25 tons.

Question

Figure 2.1. Production Possibilities Frontier  
-Referring to Figure 2.1, the relative cost of steel in terms of aluminum is
A) 4.0 tons. 
B) 2.0 tons. 
C) 0.5 tons. 
D) 0.25 tons.

Quizplus · Accepted Answer

The relative cost of steel in terms of aluminum is determined by comparing how much of one material can be exchanged for another. If the figure indicated that 1 ton of aluminum is equivalent to 2 tons of steel, then the cost of 1 ton of steel in terms of aluminum would be 0.5 tons, as you would need only half a ton of aluminum to get one ton of steel.